Oct 4, 2016
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Can the traditional telcos adapt to survive in this climate?

Written by

Christian Goetz - BDOTo survive, companies need to
become more agile, as well as acquire and join forces with
technology companies to augment their offerings.

BDO’s 2016 Telecommunications Risk Factor
Survey
, highlights the strategic and operational risks
reported by sixty of the world’s largest telecoms
companies. The survey shows a range of issues, from interest
rate fluctuations to new technologies, are playing more heavily
on the minds of industry leaders today compared with in 2015.
While myriad challenges face this sector, the findings also
provide insight as to how companies can best adapt.

My top 5 tips are as follows:

(1) Match consumer needs

The communications preferences of consumers has changed
dramatically, with the majority now using mobile devices for
streaming video content via Netflix or YouTube, and for
communicating on apps such as Skype, Snapchat and WhatsApp.
These changes have put strain on bandwidth capacity, and
accelerated a shift away from voice telephony. Ultimately,
consumer habits will continue to dictate the future of telecoms
and providers that offer customers the fastest speeds and best
service at the right price will outperform competitors.

(2) Consider M&A (carefully)

Established players face competitive threats from both
industry consolidation and new market entrants. A healthy level
of telecoms M&A activity looks set to continue and it will
be interesting to see what game-changing mergers take place in
the coming year. Strategic deals, such as the acquisition of
satellite television company DirecTV by global telecoms
provider AT&T, will create new ways to bundle services and
maximise the selling opportunities to customers. Now, more than
ever, strategic mergers and acquisitions will be a popular
option for telecoms companies trying to develop an ever more
attractive proposition for customers and to share enormous
investment requirements.

(3) Embrace innovation

Telecoms companies have hard choices to make about their
strategic focus, which may require 'big bets’ on
major capital expenditure projects. Organisations in this space
need to remain responsive to rapid market changes. For example,
until recently data centres were considered a high growth
market for telecoms providers. However, as specialist start-ups
and global giants such as Amazon Web Services have compressed
margins in this segment, many traditional telecoms businesses
have retreated from this market. Pursuing growth via more
radical innovations will certainly be the lifeblood for some
companies and expect to see some investing more into
proprietary mobile applications and content.

(4) Think defensively

Cybersecurity has risen up the telecom
industry’s risk radar, and spending on security
infrastructure has increased year-on-year. As customers become
more conscious of security issues, the reputational damage
caused by significant data breaches could result in an
irrecoverable loss of customer trust. It’s
essential companies adopt an ever more defensive strategy to
prevent failure in this increasingly high-risk area.

(5) Think tech not telecoms

Telecoms companies are particularly worried about the impact
of the European Commission’s Digital Single Market
initiative. This has potentially far-reaching implications for
net neutrality, spectrum policy and management, and roaming.
The abolition of roaming charges is just one example of a
change that is likely to hit the industry’s
bottom-line hard over the coming years.

In order to fend off these risks, a tactic for some telecoms
companies will be to adapt to become broad-based tech
companies, which can break into new markets, win over consumers
and withstand challenges from new market entrants more
effectively.

Ultimately, the pace of change faced by the global telecoms
sector has never been more intense. This is a difficult market
firms must adapt or they will not survive. While many are
facing challenges across a number of fronts emerging
technology, entrepreneurial new competitors, and financial
instability – those that employ creative ideas around
their existing services or infrastructure, enhance their
financial planning and invest against areas of risk like cyber
security will win out.

Christian Goetz is leader of BDO’s Global Telecoms team and
can be contacted on +49 69 95941-514 or at
christian.goetz@bdo.de

Read on: GlobalTelecomsBusiness

Article Categories:
TMT Industry

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